An Australian court ruled on Monday that users of Kazaa, a popular
internet music file-swapping system, breached music copyright and
ordered its owners to modify the software to protect copyright.

Federal Court Judge Murray Wilcox ruled that Kazaa's owners, Sharman
Networks, had not breached copyright but had encouraged millions of
Kazaa users worldwide to do so.

"The respondents have long known that the Kazaa system is widely used
for the sharing of copyright files," said Wilcox in his ruling in a
Sydney court.

Australia's major record companies sued Kazaa's Australian owners and
developers, Sharman Networks, claiming Kazaa's breach of copyright had
cost them millions of dollars in lost sales.

"The court has ruled the current Kazaa system illegal," Michael Speck,
a spokesman for the Australian music industry, told reporters outside
the court.

"It is a great day for artists, it is a great day for anyone who wants
to make a living from music," Speck said.

The record companies will now seek damages for hundreds of millions of
pirated music downloads, saying Sharman Networks had boasted that
Kazaa downloaded 270 million tracks a month.

The music companies include the local arms of Sony BMG Music
Entertainment, EMI Group, Warner, Universal Music and several
Australian firms.

Sharman Networks defended the use of the internet to download music
tracks, telling the court that file sharing reflected a revolution in
the way music was distributed and sold.

It said it had copyright protection in place, such as its licensing
agreement, but added it could not control the actions of an estimated
100 million worldwide users.

Judge Wilcox said Kazaa failed to use available technology, such as
key word filters, to prevent copyright infringements because it would
have been against its financial interest.

He said that Kazaa's "Join the Revolution" Web site campaign to
attract users did not directly advocate sharing copyright files, but
criticised record companies for opposing file sharing.

"It seems that Kazaa users are predominately young people, the effect
of this web page would be to encourage visitors to think it 'cool' to
defy the record companies by ignoring constraints," Wilcox said.

"If Kazaa cleans up its act and does what the court has ordered it to
do, stop its illegal business, then they have an opportunity to be
part of the music industry," said music industry spokesman Speck.

Recorded music sales have slipped in recent years, with global sales
down 7.6 per cent in 2003 to $32 billion, according to the
International Federation of the Phonographic Industry.

The federation blames rampant piracy, poor economic conditions and
competition from video games and DVDs for the slump. Supporters of
file swapping argue that it can encourage people to buy music by
exposing them to a range of styles.